Posts Tagged "families"

Low-income Spend Tax Credit on Food, Rent

The fate of the recent expansion of the federal child tax credit is uncertain in the ongoing budget negotiations in Congress. What is clear is that poor and low-income families are putting the increased assistance to good use.

Low-income families figureNine out of 10 families earning less than $35,000 are spending the money on one or more essential living expenses, which include food, utilities, housing, clothing or education needs like books and after-school programs, according to an analysis of U.S. Census data by the Center on Budget and Policy Priorities.

The American Rescue Plan passed in March temporarily increased the credit from $2,000 to $3,600 per year per child for kids under age 6 and to $3,000 for older kids and teenagers. In another temporary provision in the legislation, the IRS sends the credit to families every month in the form of a monthly payment.

The child tax credit is also now fully refundable, which means that low-income people are eligible for the full credit even if they pay little or no income taxes. If the budget negotiations make this a permanent feature of the credit, the IRS would extend the federal assistance to 27 million more children in low-income families.

Unfortunately, the center estimates, there are some 4 million children in families with very low incomes that aren’t receiving the monthly payments, either because they didn’t file taxes in 2019 and 2020 or didn’t receive an economic relief check from the federal government. The IRS has created an online tool for parents to sign up and start receiving the credit.

The Center on Budget and Policy Priorities asked the people it surveyed about their specific uses for the monthly cash payments. Six out of 10 families earning under $35,000 said they are spending the money on food. About half are paying their utilities or housing expenses. Even the non-essential expenses seem like good uses for the extra funds, including car payments, childcare, and paying down debt.

Higher-income families also buy necessities with the extra cash. But low-income families struggle more to pay for their basic living expenses, and the center said they are using more of the money from the tax credit to pay for them. …Learn More

ACA Eased the Financial Burden on Families

Woman and baby at the doctors

The Affordable Care Act (ACA) has reduced families’ medical costs significantly.

The ACA’s main goal was to provide coverage for the first time to workers who lack employer health insurance. But the expansion of free or subsidized health care to millions of parents with low and modest incomes has improved their financial stability and freed up money for their families’ other critical needs, concluded a new University of California at Davis study.

The main way the ACA expanded coverage was by giving states the option of providing Medicaid to workers earning up to 138 percent of the federal poverty level. The law also increased the number of children with health insurance, because federal and state outreach during the Medicaid expansion raised parents’ awareness of two separate insurance programs that had long been available to children: Medicaid and the Children’s Health Insurance Program. To help families with modest incomes, the health care law put a cap on their annual medical spending.

Prior to the ACA’s passage, out-of-pocket medical costs were a high financial burden for 15 percent of U.S. families. That has fallen to about 10 percent of families in the years since passage, the researchers said.

What qualifies as a high cost burden depends on the family’s income. One example: the researchers determined that a family earning $75,000 had a high cost burden if they paid more than 8.35 percent of their income for out-of-pocket deductibles and copayments.

However, the study is not a current picture of the situation, because it was based on data from health care spending surveys in 2000 through 2017, prior to the pandemic. During the past year, millions of people were laid off and lost their employer health insurance when they may need it most.

But the ACA’s benefits are clear, the researchers said. Another aspect of the reform was to allow workers who earn too much to qualify for Medicaid to purchase subsidized private health insurance on the state exchanges. The law capped the total that workers spend on health care – once they reach the cap, their care is fully covered. …Learn More